Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock is 20 percent of value. Operating cost (excluding the cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rate of return on asset in percentage?

Al-Shamukh Constructors Ltd. currently has sales of OMR 24 million a year, with a stock level of 25 percent of the sales. Annual holding cost for the stock is 20 percent of value. Operating cost (excluding the cost of stocks) are OMR 15 million a year and other assets are valued at OMR 30 million. If the stocks levels are reduced to 20 percent of the sales, then what will be the improvement (or reduction) in the rate of return on asset in percentage?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter3: The Financial Environment: Markets, Institutions And Investment Banking

Section: Chapter Questions

Problem 15PROB

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